2 weeks ago
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Prime Minister Anthony Albanese has defended his move to tax trusts, as Opposition Leader Angus Taylor launched an attack on Labor, arguing the government was creating a “death tax by stealth”.
A similar scare campaign proved politically poisonous for Labor at the 2019 election, leading to the resignation of then-deputy leader Tanya Plibersek who on Monday defended the government’s current tax agenda in a fiery interview on morning television.
The opposition has weaponised the notion that Labor is introducing a “death tax” after Treasurer Jim Chalmers announced in last week’s budget that a 30 per cent rate would soon apply to all discretionary trusts to better align earnings from investments with income tax.
“It’s a death tax by stealth. There’s no doubt about that,” Taylor said on Monday.
About 80 per cent of trusts in Australia are discretionary, with around 840,000 currently in operation. They hold assets for a group of people, often a family, and the distribution of income from those assets can be channelled to an individual.
Appearing on Seven’s Sunrise on Monday morning, Social Services Minister Tanya Plibersek repeatedly defended the move and rebuffed the label of a “death tax”, arguing: “You can still have a fixed testamentary trust if you want to.”
She went on to say: “The reason we’re doing this is because people who work for a living have to pay their tax, it comes out of their wages every single week. People who work for a living should not get taxed more on their wages than people who are living on their assets.”
Plibersek appeared alongside One Nation MP Barnaby Joyce, who interjected and attacked Labor for lying about election promises not to alter the capitals gains tax discount and negative gearing.
Joyce said the government’s changes were “socialism at play”, and would result in people living in their cars because they could not afford to pay rent.
As Joyce interrupted Plibersek to repeat that it was “30 per cent tax”, Plibersek said: “Most people don’t do this.”
Data from the Australian Tax Office shows there were approximately 10,000 testamentary trusts operating in 2022-23, the last time data was available.
Distributions are currently taxed at that individual’s marginal tax rate, meaning the tax burden from that income can ostensibly be reduced to zero. The government’s changes are set to come into effect on July 1, 2028.
Deceased estates were carved out of the government’s plan to tax these trusts, following the political ruin of the 2019 scare campaign many believe was fundamental in Scott Morrison’s “miracle” win. However, it has become clear that discretionary testamentary trusts, which are created in an individual’s will and only come into effect after their death, will garner the 30 per cent tax.
Unlike fixed testamentary trusts, in which funds are split based on a preexisting determination in the will, a discretionary trust allows an appointed trustee to decide where the income from assets in the trust flows.
“What we’re doing is making sure that there’s a better alignment between the tax paid on your labor, on working, and that paid on your assets. And that is a reasonable thing to do,” Albanese told reporters in Adelaide.
Joining Albanese and Plibersek’s defence of the move, Chalmers said on Monday: “We’re making sensible, common-sense changes.
“People are entirely free to set up fixed testamentary trusts after 2028 if that’s how they would like to avoid paying the minimum tax.”
The budget has proved unfavourable for the government, which slumped 3 percentage points in the latest Resolve Political Monitor conducted for this masthead. More than a third of respondents said their view of Labor had been damaged.
The ongoing post-mortem of the budget has also personally hurt Albanese, who has fallen behind Opposition Leader Angus Taylor as preferred prime minister 33-30.
The prime minister has been on a multi-state blitz, spruiking the budget in New South Wales, South Australia, Victoria, Tasmania and Western Australia in the week since Chalmers handed down the document.
