Tradies, builders and family SMEs face new tax

The proposed family trust tax could increase costs for tradies and builders, the Housing Industry Association (HIA) has warned. Cosboa, meanwhile, has called for the legislation to be rejected outright, citing risks of higher taxes, costly restructuring and reduced flexibility for small businesses. In its submission on the draft legislation, HIA said the proposal could affect a significant proportion of the building industry. MD Jocelyn Martin said around three in five HIA members operate through a family trust. “For many Australians, a family trust may sound like a structure reserved for wealthy investors. In reality, family trusts are a common and legitimate way for tradies, builders and small family businesses to operate,” Martin said. HIA said the changes could affect licensing, insurance, financing, contractual obligations and business management. Builders would need to spend time and money consulting accountants, lawyers, insurers and regulators to determine how to operate under the new regime. “The Government may view this as a tax measure, but for thousands of small businesses it creates a ripple effect that extends across every aspect of how they operate,” Martin said. Cosboa said the Government had made concessions following months of consultation, but key issues remained unresolved. CEO Skye Cappuccio said businesses would face three options: restructure, pay a minimum tax rate of 30 per cent or lock in fixed distributions under an alternative election arrangement, reducing their flexibility. Cosboa estimated restructuring costs at $15,000 to $50,000, excluding state and territory transfer duties. Businesses that later change their fixed distribution arrangements could face a tax rate of up to 47 per cent on trust income that year. Around 350,000 Australian small businesses operate through discretionary trusts, which Cosboa said could face additional taxes, restructuring costs or changes to existing arrangements. “These are not genuine choices. They are three bad options that will make operating a small family business harder and more expensive,” Cappuccio said. She said governments should not penalise family businesses for ordinary decisions as ownership and circumstances change. HIA warned that the proposal would add to industry pressures, including rising insurance premiums, workplace obligations, regulatory costs and labour shortages. Additional costs could limit investment in staff, apprentices and equipment, while restructuring could divert builders from construction and site supervision. “We need builders on site building homes, supervising projects, employing apprentices and delivering much-needed housing, not sitting in accountants’ offices trying to work out how they need to restructure their business,” Martin said. Cosboa argued that the proposal targets a business structure rather than the conduct the Government seeks to address, calling for targeted measures to protect tax integrity without imposing unnecessary costs. HIA urged governments to support builders and increase housing supply. “At a time when Australia needs more tradies, more builders and more homes, the last thing our industry needs is a new tax on tradies dressed up as a tax on trusts,” Martin said. Further reading: Unresolved stamp duty laws could harm SMEs, experts warn. The post Tradies, builders and family SMEs face new tax appeared first on Inside Small Business.