CPA Australia Warns Trust Tax Reform Must Close Stamp Duty Loophole to Protect Small Business

Australia’s peak accounting body has warned the Federal Government’s proposed trust tax reforms risk creating an unfair “postcode lottery” unless state and territory stamp duty costs are addressed before the legislation is finalised.

CPA Australia says while the Government’s consultation on a proposed 30 per cent minimum tax on discretionary trusts is a welcome step, businesses restructuring in good faith could still face significant state-based costs that undermine the intended tax relief.

The proposed reforms would apply from 1 July 2028, with eligible businesses able to access Commonwealth rollover relief if they choose to move from a discretionary trust into a company, fixed trust or individual business structure.

However, CPA Australia argues that without corresponding stamp duty relief across the states and territories, many small businesses could be left paying thousands of dollars simply because of where they operate.

Small Businesses Could Face Unequal Costs

CPA Australia Tax Lead Jenny Wong said discretionary trusts have long been the preferred structure for many family-run businesses because they offer flexibility and asset protection during the early years of operation.

“Discretionary trusts are the default starting point for many small businesses in Australia. They are not automatically sophisticated tax plays,” Ms Wong said.

“For most small businesses, a discretionary trust isn’t some elaborate tax structure – it’s the first thing they set up. When you’re starting out, you don’t know what your profits will look like from one year to the next, or what risks you’re taking on.”

“A trust gives many family businesses flexibility to manage uncertainty and asset protection to manage risk, without the cost and rigidity of a company.”

She said changing business structures is rarely straightforward, often requiring legal and accounting advice, updated employment contracts, revised leases, supplier agreements and finance documentation.

While the proposed Commonwealth rollover relief may eliminate federal income tax and capital gains tax liabilities, state and territory transfer duties remain outside the consultation process.

“A Postcode Lottery”

Ms Wong said the omission creates a significant gap in the proposed reforms.

“This consultation paper runs to 17 pages and includes 17 discussion questions but does not mention state stamp duty once,” she said.

“Until that changes, the Commonwealth’s rollover relief only solves part of the bill small business is being asked to pay.”

“Right now, the same restructure can cost one business nothing and another business tens of thousands of dollars, purely because of the state they are in. That is not tax reform – it’s a postcode lottery.”

CPA Australia is calling on the Federal Government to work with state and territory governments through the Council on Federal Financial Relations or National Cabinet to deliver a nationally consistent approach before the legislation is introduced.

“Small businesses restructuring in good faith should not be given relief with one hand by Canberra and handed a stamp duty bill with the other by their state government,” Ms Wong said.

Regional Businesses Could Be Hardest Hit

CPA Australia believes the reforms are likely to have their greatest impact on smaller businesses, particularly those operating in regional Australia.

According to Ms Wong, many larger family businesses have already transitioned into company structures to benefit from the lower 25 per cent corporate tax rate.

“What typically remains in discretionary trusts are smaller, single-family businesses that have never had a reason to change structure,” she said.

“These are exactly the businesses least likely to have the advisory budgets, time and capacity to restructure quickly.”

She said regional retailers, tradespeople, professional practices and farming enterprises frequently rely on discretionary trusts because they best suit their business operations—not because they are seeking aggressive tax advantages.

“The businesses most exposed are smaller operators without significant advisory budgets, often with trust structures built up over many years. Regional businesses are likely to carry a disproportionate share of that risk,” Ms Wong said.

Businesses Facing Uncertainty

CPA Australia also warned business owners are being asked to prepare for major decisions before the final rules have been settled.

The proposed minimum tax is scheduled to begin on 1 July 2028, with a restructuring window expected to open from mid-2027, yet many aspects of the legislation remain under consultation.

“Businesses are being asked to plan for decisions that could cost tens of thousands of dollars either way, but the rules do not exist yet,” Ms Wong said.

“CPA Australia wants this reform to be workable – getting the detail right now is what will allow business owners to plan, rather than guess.”

She added that the reforms have the potential to affect hundreds of thousands of Australian small business owners, many of whom will require professional advice regardless of whether they ultimately restructure.

Directors Face New Personal Liability

CPA Australia has also raised concerns over proposals that would make directors of corporate trustees jointly and severally liable for the new minimum tax, alongside expanded Australian Taxation Office collection powers.

“For small, family-run businesses using a corporate trustee – a common and unremarkable structure – this is a meaningful new personal risk,” Ms Wong said.

“That deserves closer public scrutiny before the design is locked in.”

The organisation also questioned proposed rollover provisions requiring businesses to transfer all, or substantially all, trust assets into a new structure rather than allowing a staged transition.

“An all-or-nothing asset transfer raises the stakes considerably,” Ms Wong said.

“Combined with the unresolved state duty issue, it could make restructuring too risky or too costly for the very businesses the transition rules are meant to help.”

Positive Steps Recognised

Despite its concerns, CPA Australia acknowledged several positive elements within the consultation paper, including improved rollover arrangements and the proposed removal of Family Trust Distributions Tax for genuine business restructures.

“There are positive aspects of the consultation paper,” Ms Wong said.

“Treasury has clearly listened on some real technical concerns.”

“The state duty gap is however the piece that is still missing.”

CPA Australia also noted that the consultation proposes a legislative response following the Australian Taxation Office’s loss in the High Court’s Bendel case, creating another layer of uncertainty for advisers and business owners.

“Small businesses and their advisers are now being asked to plan around three unsettled pieces of law at once – the minimum tax, the rollover relief and the treatment of unpaid entitlements to a bucket company,” Ms Wong said.

“Every one of those issues affects the same restructuring decision, and none of them has a settled design yet.”

CPA Australia said it supports the Government’s objective of creating a fairer tax system but believes the final legislation must ensure businesses acting in good faith are not penalised by inconsistent state taxes or unnecessary restructuring costs.

“Good tax reform should help Australian small businesses compete and invest, not divert their attention and capital into avoidable restructuring costs,” Ms Wong said.