‘We don’t see the mischief’: Bodies slam double taxation on corporate beneficiaries

The Institute of Public Accountants’ senior tax adviser Tony Greco told a Senate hearing on discretionary trusts that the accounting body cannot see the business case for punishing a legitimate business that uses a corporate beneficiary for reinvestment back into the underlying business.

“We don’t see the mischief, and it goes beyond that policy intent. We don’t sign up for double taxation,” Greco said.

Greco made the comments at the Senate Economics Legislation Committee public hearing on the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 in response to Liberal senator Jane Hume’s question about whether bolstering anti-avoidance provisions would address concerns around businesses avoiding tax without subjecting legitimate businesses to new red tape.

“You mentioned earlier the desired outcome of the bill is to make sure that people aren't avoiding tax. But we already have specific anti-avoidance provisions in Section 100A and Division 7A and the general anti-avoidance provisions of 4A,” she said.

Greco agreed that there is already a raft of anti-avoidance measures that are designed to combat any tax avoidance.

“Treasury has always highlighted this reinvestment. Reinvestment of profits back into the business. Tell me what the mischief is,” Greco said.

“Other than you're allowing the use of those funds in an environment that has a 50 per cent discount because trusts can avail themselves. But we're moving from a 50 per cent CGT discount to indexation, so that particular integrity issue that has been raised in the past will no longer be relevant going forward.

“This goes well beyond income splitting and a 30 per cent minimum tax rate.”

Chartered Accountants Australia and New Zealand (CA ANZ) Australian leader, tax, superannuation, and financial services, Susan Franks told Hume that double taxation is occurring not just at the corporate level but also where there is an interposed fixed trust.

“The rules, as they're currently drafted, only allow the recognition of a tax offset where there is a minimum tax trust,” she said.

“A minimum tax trust excludes fixed trusts. You've got this situation where the discretionary trust makes $100, distributes it to a fixed trust. There's 30 per cent tax payable. The fixed trust distributes that $100 to an individual beneficiary on top marginal tax rate.

“There's another $47 worth of tax payable. The EM [explanatory memorandum] says that the fixed trust can utilise the tax offset, but the fixed trust has just distributed all its income, so it doesn't have any tax to use the tax offset. You end up at an effective tax rate of 75 per cent, 77 per cent.”

In its submission to the Senate Economics Legislation Committee Inquiry on the minimum tax on discretionary trusts legislative package, CA ANZ said the bill imposes a double taxation on income received by corporate beneficiaries and trust beneficiaries which are not minimum tax trusts (fixed trusts and trusts that have chosen to make an excluded election trust (EET) – that is effectively fixed trusts).

This occurs due to the legislation denying companies and beneficiaries of interposed fixed trusts that receive trust distributions an offset for tax already paid by the minimum tax trustee.

“A ‘t account’ for companies would prevent double taxation, preserve the 30 per cent minimum tax on discretionary trust distributions and remove the need for expensive restructures. CA ANZ recommends reconsideration of this proposal,” the submission said.

Tax reform compliance bill to rack up to $595m a year

During the hearing, CPA Australia contended that Treasury’s $48 million compliance price tag is a gross underestimation and instead said it could cost businesses up to $595 million a year to comply with the new tax reforms.

The body’s tax policy lead, Jenny Wong, provided estimates of how much families and businesses would need to spend to comply with the government’s tax reforms, including discretionary trust and capital gains tax (CGT) changes.

On top of spending between $2 billion and $2.8 billion just to obtain professional advice on what decisions to make, Wong said they would be required to spend between $221 million and $595 million every year to comply.

Wong said the gap is not hours spent on advice, as the two estimates are broadly similar on workload. Rather, the difference is that Treasury prices an hour of advice at around $91, while families will generally pay commercial professional rates.

Together with Payday super and other regulatory changes, Wong said ongoing compliance costs could climb to over $1.1 billion a year.

“Australia cannot keep talking about productivity while adding hundreds of millions of dollars a year in compliance costs. Higher compliance costs don’t just slow productivity,” Wong said.

“Simpler business structures may help over time, but families and small businesses pay for the changes today. If these new rules come in, the old rules they replace should go.

“That includes the existing family trust election rules, where the trust can face a 47 per cent penalty for paying someone outside a narrowly defined family group.”