As we are all aware we are facing a federal election sometime between now and May 2019.
Whilst at Alderton Financial we do not advocate for any particular political party we do see our responsibility as one of oversight with respect to policy announcements.
To this extent we will comment on any policy development that may affect our client base. As is often the case with policy announcements they are invariably global in nature and avoid referring to any detail in the actual policy document.
Such is the case with a recent Labor and its intentions to change the way in which Discretionary Trust distributions are taxed. To this extent the intention is to tax any distribution to a beneficiary aged over 18 years at the rate of 30%. This change would apply from July 1 2019, immediately after the next election should Labor win.
Whilst such a change, if implemented, would have no effect on most Australians it has the potential to have a significant impact on many businesses in Australia.
ATO research indicates that there is now more than $590 billion of assets sitting in family discretionary trusts. It is also estimated that there are more than a million small businesses operating through discretionary trusts in Australia. Indeed many of our clients operate in this manner.
One should always be aware that tax avoidance is not illegal but tax evasion is. It is therefore appropriate for all tax payers to organise their affairs in such a way as to only pay the amount of tax they are legally obliged to do and avoid paying any more than that.
We will continue to keep an eye on policy developments in the run up to the federal election.