The Council of Small Business Organisations Australia (COSBOA) lodged a formal objection to the government’s proposal for a 30 percent minimum tax on discretionary trusts, warning that the measure could impose billions of dollars in restructuring costs on small enterprises.
Submission details and estimated impact
In a submission to the federal government’s consultation process, the group cited Treasury data indicating that roughly 350,000 Australian small businesses operate through discretionary trusts. About 210,000 would face a higher tax burden if the rule proceeds.
The calculation showed that restructuring each affected business could cost between $15,000 and $50,000. Multiplying those figures across the estimated firms yields a total impact ranging from $3 billion to $10 billion.
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“This proposal is grossly unfair,” said chief executive Skye Cappuccio. “It imposes a financial penalty on arrangements that have been legal for decades and are commonly used by small businesses for legitimate commercial purposes, including asset protection, succession planning and business continuity.”
Arguments against the blanket approach
Cappuccio argued that the government’s framing – aligning trust income tax with the rate paid by employees – does not reflect the reality of many family‑run firms. The consultation paper suggests the policy would bring trust income taxation in line with an effective 30 percent rate that applies to salaries over $200,000. However, many family members who receive most of their income via trust distributions never reach that threshold.
She warned that a one‑size‑fits‑all rule risks catching businesses that were never the intended target. “Small businesses support a fair and robust tax system, but integrity measures should be targeted and proportionate. They should focus on the behaviour of concern, not impose additional costs on family businesses using longstanding and lawful business structures,” she added.
The submission also calls for greater transparency. COSBOA wants Treasury to publish the modelling that underpins the proposal, including any residual tax gap after existing rules are applied, the number of trusts actually engaged in the targeted behaviour, and realistic estimates of compliance and restructuring costs.
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Proposed alternatives and exemptions
If the government proceeds with the minimum tax, the organization is urging that businesses with annual turnover under $10 million be exempted, arguing they are the least able to absorb the restructuring expenses. The group also floated a lighter‑touch option: an annual distribution‑pattern test that could address integrity concerns without forcing widespread changes to legal business structures.
“We support maintaining the integrity of Australia’s tax system, but there are better ways to achieve that than imposing a blanket tax on legal business structures that will threaten the viability of valued small businesses,” Cappuccio said.
The full submission is available for download from COSBOA’s website. The organization continues to monitor the consultation process and will engage with policymakers as the proposal moves forward.