Daniel Cole
Managing Director
Commercial and Succession Planning
What has been proposed?
Small business owners who use corporate beneficiaries to receive trust distributions may be affected by the government’s recent announcement of proposed tax changes as part of the Federal Budget. However, we are still waiting to see the detail, including how excess franking credits from trust distributions will be treated and whether the proposal to exclude corporate beneficiaries from receiving a 30 per cent tax credit will be revised to address concerns about double taxation.
When would the changes start?
The proposed changes are not expected to commence until 1 July 2028, giving taxpayers time to review and, if needed, amend their asset ownership structures during the intended rollover relief period without triggering CGT.
What should you do now?
Balancing asset protection, succession and estate planning, and tax planning may look different in the future. However, until further detail is released and any legislative changes are confirmed, it is generally best to delay restructuring. Any new structures should continue to be based on current legislation.
Given the uncertainty, it is not advisable to make changes or establish new asset ownership structures that differ from current best practice simply to anticipate the proposed reforms. For now, taxpayers should continue to make decisions based on the law as it currently stands. Trying to predict the final form of the changes and restructuring too early may lead to unintended consequences. In particular, if an unsuitable structure is implemented now, the government’s proposed rollover relief may not apply in a way that allows it to be unwound later.
For those acquiring shares in a privately held company or investing in property, professional advice that supports ownership through, or beneficially via a discretionary trust should still be followed where it remains the most appropriate structure, even if a restructure is required at a later date.
Looking ahead
While this Budget proposal may materially affect how assets are held and controlled, including the need to review family structures and wills that use testamentary trusts, clearer strategies will emerge once the proposed changes are known. Those strategies can then better balance tax planning with asset protection, estate planning, and succession planning.
We will continue to monitor developments and update our communications as further details emerge. In the meantime, if you would like to discuss these proposed changes and what they may mean for you or your estate planning, please do not hesitate to contact our team on 5445 3333.
