expanded options to limit or eliminate<\/a> those restructuring costs. But state governments and experts have cast serious doubts that trusts that do choose \u2013 under the proposed scheme \u2013 to fix annual distributions would actually avoid state stamp duty. <\/p>\nThe Queensland government on Monday did not confirm that changing structure from discretionary distributions to fixed distributions under the draft legislation would actually help the business avoid stamp duty, instead saying it would depend on individual circumstances. <\/p>\n
\u201cIt is up to the federal government to consult with industry and Jim Chalmers to explain how his changes interact with Queensland law,\u201d Queensland Treasurer David Janetzki told The Australian. <\/p>\n
\u201cJim Chalmers\u2019 budget decisions have left a mess and Queensland taxpayers should not have to clean up after him.\u201d<\/p>\n
According to Queensland Treasury, the question of whether changing from discretionary distributions to fixed distributions would attract stamp duty would depend on individual circumstances, the operation of the federal legislation, and how this would interact with Queensland laws. <\/p>\n
When contacted for comment, Dr Chalmers\u2019 office pointed to a letter he wrote to Mr Janetzki in which he told him that he was \u201cextremely concerned that despite Queensland\u2019s many strengths and despite substantial and increasing commonwealth support, your budget position has experienced a sharp deterioration according to S&P and the state government risks having its credit rating downgraded\u201d.<\/p>\n
The federal government maintains that the election option is not expected to result in any state or territory stamp duties. <\/p>\n
Experts and business groups are also raising concerns that government rollover relief is not enough and that it does not take into account the various licensing and insurance schemes for which businesses will have to account. <\/p>\n
This is of particular concern for home developers. Master Builders Australia, the industry association, estimates 20 per cent of its member organisations are held in discretionary trusts. <\/p>\n
\u201cIt\u2019s another layer of complexity for the industry to deal with, another disincentive to get on with building the homes that everybody needs rather than encouraging and supporting these businesses,\u201d Master Builders national director of policy and legal Melissa Byrne said. <\/p>\n
\u201cIf you want someone to build your house for you in New South Wales, for example, the builder that you engage to do that is required to hold a builder\u2019s licence.<\/p>\n
\u201cIn most jurisdictions, you need warranty insurance or home warranty insurance or builder\u2019s indemnity insurance. <\/p>\n
\u201cIt\u2019s not as simple as just transferring the entity.<\/p>\n
\u201cThe state-based authorities won\u2019t sort of let you transfer a licence because it\u2019s a completely different entity. You\u2019ve got contracts and things entered into with that specific entity, with that specific licence. <\/p>\n
\u201cIf you close that down, it no longer exists and you need to get a new licence that is attached to that new entity.<\/p>\n
\u201cIt\u2019s costly, time-consuming. The different jurisdictions will have different eligibility criteria for those licences that you need to satisfy. It will also differ across the country as to whether or not they will take into account your past business experience under that previous entity.\u201d<\/p>\n
BDO Australia tax partner Anthony Sloan said restructuring a business from a discretionary trust to a company was \u201cnot a simple administrative exercise that can be achieved by making an election\u201d.<\/p>\n
\u201cWhere the trust carries on an active business, the restructure may require the assignment or novation of customer contracts, supplier arrangements, leases, licences and permits, together with the transfer of employees and compliance with employment law obligations,\u201d he said. <\/p>\n
\u201cRegulatory approvals may also be required and, in some cases, counterparties may refuse to consent to the transfer. <\/p>\n
\u201cThe practical reality is that moving a business from a trust to a company can involve significant legal, commercial and operational work, cost and disruption.\u201d<\/p>\n
CPA Australia head of tax policy Jenny Wong said while there was rollover relief thousands of businesses who do decide to rollover to a company structure would face licensing issues. <\/p>\n
\u201cMove the business into a new company and you\u2019re a new legal person,\u201d she said. <\/p>\n
\u201cIn most cases that means a new application, not a transfer.<\/p>\n
\u201cFor a builder, that means satisfying financial requirements from scratch with no trading history. For a training provider, it means you can\u2019t teach until the new registration is approved. The rollover fixes the tax bill. It doesn\u2019t get you your licence back.<\/p>\n
\u201cThe government has accepted that restructuring out of discretionary trusts requires transitional support. That is the purpose of the time-limited restructure rollover. <\/p>\n
\u201cThe rollover, however, addresses only the income tax and capital gains tax consequences of a restructure. It does not address the regulatory consequences that arise when the legal person conducting the business changes.\u201d<\/p>\n
Opposition Treasury spokesman Tim Wilson accused the Treasurer of having \u201claid tax landmines throughout the budget and they\u2019re exploding on small business\u201d.<\/p>\n
\u201cEvery time he tries to detonate them, it just reveals more landmines and that he never understood his budget and the changes he proposed,\u201d he said. <\/p>\n
\u201cSmall businesses have already had to pay tens of thousands to get advice, and now they\u2019ll continue to be exposed to higher taxes because the Treasurer can\u2019t kick his spending addiction.\u201d<\/p>\n
Dr Chalmers\u2019 office said the changes were \u201call about delivering a fairer tax system and helping fund tax cuts for workers by better aligning the tax rate on trust income with tax rates paid by workers\u201d.<\/p>\n
\u201cThe draft legislation includes expanded options to limit or eliminate restructuring costs for small businesses and others using discretionary trusts,\u201d a spokesman said. <\/p>\n
\u00a0\u201cThe new election option means discretionary trusts would be exempt from the minimum tax and would not require a restructure. Expanded rollover relief will be available for three years from July 1, 2027, to assist taxpayers that wish to restructure out of a discretionary trust into other arrangements. Treasury is consulting on the draft legislation and we encourage stakeholders to engage with them early.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Jim Chalmers\u2019 \u201crollover relief\u201d for trusts changing their structures to avoid his tax raid will lead to 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