Chartered Accountants Australia and New Zealand (CA ANZ), CPA Australia, Institute of Public Accountants, National Tax & Accountants’ Association, and The Tax Institute (the Joint Bodies) have made a submission to the Hon Dr Daniel Mulino MP, Assistant Treasurer and Minister for Financial Services. The submission sets out key policy concerns with the family trust election (FTE) and family trust distribution tax (FTDT) provisions in Schedule 2F to the Income Tax Assessment Act 1936. This is further to CA ANZ’s submission to Treasury on the same issues.

The rules designed to prevent trust loss trafficking are causing unexpected and disproportionate tax outcomes for family groups of all sizes. These impacts extend beyond large, high-wealth private groups to include many small and medium-sized businesses. In most cases, these outcomes do not involve tax avoidance or mischief.

The submission acknowledges that while taxpayers must meet their obligations, the scale and nature of these issues highlight the urgent need for legislative reform. The current provisions are having a significant impact on affected taxpayers and their advisers. Emerging FTDT liabilities for family businesses and private groups are also placing severe pressure on the accounting profession, increasing the risk of litigation for historical matters that could not have been foreseen.

The Australian Taxation Office (ATO) has advised that it cannot disregard the application of FTDT or extend the timeframes to revoke or vary elections. FTDT liabilities are not subject to a formal assessment process or a limited review period, so the ATO can enforce obligations dating back to the inception of the provisions. In review and audit cases, investigations can potentially examine matters that occurred more than 30 years ago.

The Joint Bodies are seeking an urgent roundtable with the Assistant Treasurer, Treasury and the ATO to discuss the operation and impacts of the provisions and explore legislative solutions that restore fairness, reduce compliance burdens and address the risk these rules pose, without undermining the regime’s intent.

The submission highlights five key areas where legislative amendment is needed to restore equity:

• The unlimited period of review for FTDT liabilities
• The imposition of the general interest charge (GIC) 81 days after a triggering distribution, even though no assessment has been raised by the Commissioner of Taxation. The submission acknowledges the ATO’s administrative response to allow case-by-case remission of GIC until 31 December 2026.
• Limitations on varying or revoking elections
• The application of the rules to companies and complexity in determining who is within the “family group”
• The ATO’s lack of flexibility to disregard FTDT or extend timeframes to revoke or vary elections.