Monday, 12 October 2026

The Australian

Trust law just another Chalmers Bungle

The Treasurer’s incompetence over his credit card surcharge ban highlights that he doesn’t understand the consequences of policy change, and should abandon his proposed changes to trust law before it is a wrecking ball through small business.

The surcharge ban was always a con for small business. Banks and other payment platforms still charged fees. Supermarkets negotiate discount merchant fees from banks because of volume. Small business pays full price.

The government was asking small businesses to absorb the cost in an environment of collapsing consumer confidence and declining real profits. Many had no choice but to increase their prices and leave consumers with higher costs.

But the ATO highlighted a double standard: the government wasn’t prepared to absorb the fees itself. And struggling small businesses that used credit cards as a form of an interest-free overdraft were furious.

The Treasurer was forced to admit he’d personally authorised the double standard and kicked an own goal. In isolation it’s an error. But it now falls into a sustained pattern of behaviour from the Treasurer because he doesn’t understand the implementation issues of his agenda.

Since the start of the year he’s had five major backdowns, in addition to the ATO credit card circus. The first came even before he handed down May’s federal budget. The Albanese government had to back down on its new capital gains tax changes for early-stage start-ups before the budget was even released.

The government didn’t understand that early-stage start-ups have their total value in their capital growth, and so consequently risked taking half its value. To address it the Treasurer snuck in a last-minute commitment to consult in his budget. The government still hasn’t figured out how to solve it.

Second, within weeks of announcing the budget the government had to back down on the application of its new capital gains taxes on small business. It was partly because the Prime Minister promised 50 times over that he wouldn’t introduce them. And also because it caused such a grassroots electoral backlash.

Third, it had to back down on its “widows’ tax” after it was brought to its attention that grandfathering of negative gearing would exhaust when a spouse died in a property owned by a couple.

Fourth, it backed down on minimum taxes on testamentary trusts, which would act as a “death tax”.

Fifth, to address resentment to the minimum tax on established trusts, the government created a new trust model where only beneficiaries existing by July 2028 could be nominated. In doing so it has created a “baby tax”, where new children can’t be nominated.

The last change is the most revealing. It highlights that the Treasurer is still deluded that the utilisation of trusts is about tax minimisation through family distributions. Ignorance about the application of trusts is particularly damaging. The law is a century old. Many small businesses have been advised to establish under a trust for asset protection, particularly the self-employed and small business.

Similarly, there’s an ignorance that trusts often distribute to each other, particularly in the construction sector, to manage finance. With minimum taxes on distributions, companies under existing practices risk being left tax bills greater than revenues.

As the government’s disastrous surcharge ban has revealed, legislative change without understanding unintended consequences kneecaps small business.

At least the first version of the government’s new trust legislation was released as an exposure draft, and it opened opportunities for feedback. In light of its disastrous surcharge experience, the Albanese government should at least release an updated exposure draft before it is put to parliament.

Once legislated, the new trust laws will trigger further unintended consequences. If people choose to change from their existing trust to a corporate structure, it leads to a disposal of assets invoking states to levy stamp duty.

States have baulked at waiving it. There is no agreement with the states to provide relief. And nor has the Albanese government announced a plan to shoulder the cost. And if small businesses do restructure, it triggers financing events. All insurance policies will need to be reissued for new entities, risking significant price rises.

More importantly, access to finance would need to be reassessed. Most financing facilities are established on the pre-budget environment. Banks will need to recalculate finance based on the post-budget environment of higher taxes, inflation outstripping wages, declining profitability, and falling asset prices, particularly for homes that act as the primary source of security for small business.

In that environment many small businesses will have their financing facilities reduced, if reissued at all, leaving small-business interest rates high and liquidity dry.

Understanding the consequences of a credit card surcharge ban is a walk in the park compared to the compounding effects of trust law. Before he causes more carnage on small business, the Treasurer should abandon his new trust laws.

Originally published in The Australian, available here.