About a third of all federal politicians have declared an interest in a trust, parliamentary documents show, as Labor vows to claw back billions in lost tax revenue from people using family trusts.
With the opposition seizing on inequality as a key theme for the next election, Bill Shorten announced on Sunday that Labor aimed to raise $17.2 billion over 10 years by targeting the “two-tier tax system” created by trusts.
Mr Shorten said a Labor government would tax discretionary trust distributions at 30 per cent for all adult beneficiaries – a policy the opposition says would hit 315,000 of the 642,000 trusts currently in use.
“Every year in Australia there are some fortunate high-income earners who use discretionary trusts to park their money in a lower tax bracket,” he told the NSW Labor conference on Sunday.
“The rest of the community are left to subsidise this.
“I do not begrudge anyone who’s made money. But our system should not be subsidising upwards with the taxes of the less well-off to ensure those already wealthy can become even more wealthy.”
Quickly labelled a “tax grab” by the Turnbull government, the policy will not apply to farm, charitable, deceased estate and disability trusts, and leaves 98 per cent of taxpayers unaffected by the changes, Labor says.
Trusts popular with MPs
Critics say trusts allow people to distribute tax between family members and therefore minimise their tax, but supporters argue they are an important tool for family financial planning.
The decision to tackle the funds, which the opposition says are mostly favoured by “wealthy individuals”, comes as a TND analysis shows trusts to be popular among federal politicians.
The analysis found 78 out of the 226 politicians in Federal Parliament declared an interest in some kind of trust.
This consisted of 52 of the Coalition’s 105 MPs (50 per cent) and 21 of Labor’s 95 (22 per cent), plus five of the independents.
The New Daily‘s analysis included politicians who had declared an interest in other trusts, not just the family trusts that will be targeted under Labor’s policy.
Foreign Minister Julie Bishop, Financial Services Minister Kelly O’Dwyer and Immigration Minister Peter Dutton were among those to declare an interest in a family trust, while the family trusts reported by Treasurer Scott Morrison and Infrastructure Minister Darren Chester are understood to be dormant.
On the Labor frontbench, Shadow Immigration Minister Shayne Neumann is a beneficiary of a family trust, as is Shadow Minister for Veterans’ Affairs Amanda Rishworth, while Deputy Leader Tanya Plibersek declared an interest through her partner’s family trust.
Finance Minister Mathias Cormann said small businesses were “being targeted yet again” by Labor.
“This is ultimately going to be a tax hike in particular on the many small business operators across Australia who use trusts structures as a legitimate way of managing their financial affairs,” he told Sky News.
“They will want to see how Bill Shorten thinks he’s going to be able to take $17 billion out of their pockets.”
Farmers, who will be exempt from the Labor policy, argued last week that trusts were vital for succession planning, to deal with times of volatility, and allowed family members who weren’t involved in a farm’s day-to-day operation to still contribute to the business.
Labor’s new policy also marks a shift in position for Mr Shorten, who in 2011 as Assistant Treasurer said trusts were “legitimate tax arrangements” and not “a form of tax avoidance”.