The lobby group representing small business will ask Labor to exempt “fair dinkum” people from their new policy to tax distributions from discretionary trusts at a meeting with the shadow treasurer Chris Bowen this week.
Peter Strong, the chief executive of the Council of Small Business Australia, told Guardian Australia on Monday he would ask Labor for small business-friendly concessions to the policy, unveiled on Sunday, to impose a 30% tax rate on distributions from discretionary trusts.
“What we want to ensure is, if you are fair dinkum, you are not punished,” Strong said on Monday.
Labor’s policy, which attempts to crack down on income splitting and aggressive tax minimisation by high-wealth individuals by imposing a 30% tax rate on trust distributions, does not apply to non-discretionary trusts, such as special disability trusts, deceased estates and fixed trusts, nor will it apply to farm or charitable trusts.
Discretionary trusts are vehicles used by high-income earners to distribute investment income to beneficiaries on lower marginal tax rates, in the process reducing the overall amount of tax paid.
Bowen has confirmed his new policy will hit 198,000 small businesses, but he says a high proportion would be high-wealth individuals, such as legal partnerships and medical specialists.
“The way a small business operates and functions, the way they pay their employees, is completely unaffected by this policy,” Bowen said Monday.
Bowen said the only way ordinary small businesses would be affected by the new policy was if the discretionary trust was making distributions to people not employed in the business. Those distributions would be taxed at 30%.
The Labor leader, Bill Shorten, said the new policy was not intended to hit small businesses: “It’s about high-net-worth individuals.”
Strong said small business had a good dialogue with the federal opposition, and senior Labor figures had been in touch with him over the weekend to explain the new measure, and listen to his concerns.
But Strong said he was also concerned that Labor was hedging about whether it would retain a tax cut for small businesses legislated by the Turnbull government late last year, and about recent signals from Labor about overhauling the Workplace Relations Act and protecting Sunday penalty rates.
“The unions are getting their way as never before,” he said.
Labor’s workplace relations spokesman, Brendan O’Connor, will make a speech to the Sydney Institute this week outlining some of Labor’s thinking for the next federal election on industrial relations.
At the New South Wales Labor conference over the weekend, trade union officials launched swingeing criticisms of the Fair Work Act.
During conference floor debate on Sunday, Dave McKinley from the Electrical Trades Union declared: “We need to tear the bloody [Fair Work Act] up, we need to burn it and start again.”
Brian Parker from the CFMEU described the current laws as “rat shit” and he said he hoped the union movement “with our lawyers” would be at the forefront of efforts to rewrite the legislation.
Asked on Monday whether Labor would keep the company tax cuts for small business legislated by the Turnbull government late last year, Bowen said he would take his time with that deliberation.
