ALP puts sights on trust tax avoiders

A CRACKDOWN on people using trusts to avoid paying income tax is not only fair, it will stop more than $17 billion leaking out of the federal budget, Labor argues.

The Opposition has unveiled plans to impose a 30 per cent tax rate on payments to adults from discretionary trusts.

It says this will curb the legal but unfair practice of high income-earners funnelling money through trusts to lower-earning family members, thus avoiding paying top tax rates.

“The lucky few, riding the business end of the tax system, are able to opt out of paying taxes,” Opposition Leader Bill Shorten said yesterday. “Nice deal if you can get it!” The 30 per cent level is just below the second marginal income tax rate, paid by people earning less than $87,000 a year.

The policy will “prevent leakage” in the billions from the federal budget, adding $4.1 billion to commonwealth coffers over four years and $17.2 billion over a decade, Mr Shorten said.

Shadow treasurer Chris Bowen issued a challenge to the Turnbull Government.

“Either come out today and defend income splitting, defend the current arrangements and promise no change, or admit there’s a problem and look at adopting Labor’s proposals,” he told reporters, anticipating the Government would opt for a scare campaign.

Finance Minister Mathias Cormann said there was an integrity taskforce within the tax office to rout out the rorters.

“This is ultimately going to be a tax hike in particular on the many small business operators across Australia who use trust structures as a legitimate way of managing their financial affairs,” he told Sky News.

There are about 642,000 discretionary trusts operating in Australia and Labor estimates its policy will affect 315,000 of these.