The Greens are demanding the government hike taxes on parents paying for private school fees through trusts, arguing there is a loophole in the budget reforms.
Labor needs the support of the Greens in the Senate to pass the tax on trusts, with the Coalition staunchly opposed to any tax hikes. Treasurer Jim Chalmers has already been forced to walk back a number of measures in the May budget after unforseen consequences copped backlash.
But the Greens are concerned the government has gone too far in the carveouts, and will kick the bill to a Senate inquiry after Chalmers introduced the legislation to parliament on Wednesday.
The minor party wants to interrogate an exemption to the proposed 30 per cent minimum tax on discretionary trusts, which would exclude money paid to charities.
While the bill does not name which entities will be exempt, some private schools hold charitable status, potentially excluding disbursements to them through trusts from the 30 per cent tax.
Greens economic spokesman Nick McKim said the party had serious concerns about the exemption.
“It seems as if it will be possible for people with trusts to pay private school fees or donations to private schools, and not be subject to the 30 per cent minimum tax,” the senator said.
“People with trusts, in general terms, are quite well-off, and we don’t think they should get a benefit that is not available to people who don’t have trusts – because money that goes into trusts is tax-free, but people who don’t have a trust are paying income tax.
“You need to be wealthy enough to afford a fancy accountant, or at least some accounting advice, which is not available to everyone.”
McKim would not say whether the change was a red line for the party, but said it would consider the evidence in the inquiry.
“Once we’ve been through that process, we’re happy to sit down with the government and have a conversation.”
The government is not expected to move on the Greens demands, given the arrangement has always been a feature of trusts.
But it poses a challenge to the government, which needs Greens’ support to pass the reforms.
Chalmers touted the changes in the House of Representatives on Wednesday morning, saying the trust reforms were the latest tranche in Labor’s budget which was about making the tax system fairer and more sustainable.
“We know there are legitimate reasons to use trusts, including succession planning and asset protection,” Chalmers said.
“But the flexibility provided by discretionary trusts allows some people to plan their tax affairs in ways that aren’t available to most workers and families.”
Shadow treasurer Tim Wilson was scathing of the bill and demanded an inquiry, accusing Labor MPs of failing to understand how small businesses that rely on trust to structure their tax affairs work.
“Do not misunderstand the scale of the train wreck that is about to come. You have a problem at the moment with the legislation in front of you, where if people move structures, once they move structures, it automatically... triggers a stamp duty obligation.
“The members on the other side of this chamber did not have the courage to send this legislation to an election and that is the point of why we need this inquiry.”
More to come.
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