EET may cut restructure costs, but duty risks, agent workload pressures and unfinished rules mean assurance about stamp duty and ongoing fixes are essential

The Government’s latest exposure draft on the proposed minimum tax for discretionary trusts includes an important new option: the excluded election trust regime, or EET. The EET is intended to give some trusts an alternative to restructuring under the transitional roll-over rules.

CA ANZ welcomes the attempt to reduce compliance costs. If the EET can be made to work, it may allow some family groups to keep existing discretionary trust structures rather than transfer assets into a company or fixed trust. But it is not yet clear that the option will be practical.

The policy concern remains. The minimum tax proposal can still produce double taxation where income derived through a discretionary trust is taxed at the trustee level and then again in the hands of corporate beneficiaries. The exposure draft now offers two possible pathways: restructure under the roll-over rules or elect into the EET regime. Both carry compliance costs and practical risks.

The roll-over pathway may require valuations, legal advice, deed reviews, lender and commercial approvals, GST analysis and careful management of continuity rules. CA ANZ has provided specific examples of such costs and requested a specific GST exemption for qualifying roll-over transactions, as GST could increase the stamp duty base and effectively impose tax on tax.

The EET may avoid some restructuring activity, but trustees will still need to determine whether the deed allows the election, whether it alters beneficiaries’ rights in a way that could trigger stamp duty, and whether making the election is consistent with fiduciary duties. It also relies heavily on family trust elections (FTEs), so CA ANZ has once again called for legislative changes to be made to the FTE provisions.

Those issues matter. If stamp duty is triggered, or if trustees need extensive legal advice before they can safely elect, the EET will not deliver the reduced-cost pathway intended by Government. CA ANZ has urged the Government to work with state and territory revenue offices to obtain clear rulings or commitments on duty consequences for both the EET and the roll-over.

Much of the details are still to come. The exposure draft does not settle important interactions with capital gains tax reforms, residency and non-residency rules, international tax, administration and reporting, integrity measures, and legislative determinations. Later tranches and future instruments make it difficult to assess how the regime will operate.

This creates a real risk that the final legislative package will not fit together coherently. CA ANZ has called for substantive design features to be included in primary legislation wherever possible, with draft legislative determinations released for consultation at the same time as the relevant legislation. Government should also commit to ongoing legislative maintenance, annual fixes where needed, and a holistic review after implementation.

CA ANZ’s submission also recommends practical changes to reduce compliance costs and improve certainty. These include making the fixed trust definition more explicit, clarifying exclusions for testamentary trusts and superannuation proceeds trusts, resolving the treatment of franking credits, superannuation funds, withholding payments and non-residents, providing GST relief for qualifying restructures, allowing immediate deductions for eligible restructuring costs, and building taxpayer protections into the EET regime, including limited review periods and Commissioner discretions for inadvertent breaches.

The implementation timetable is also a concern. Tax agents are already dealing with anti-money laundering obligations, Payday Super, CGT and negative gearing changes, Better Targeted Superannuation Tax Concessions, ATO system issues and debt-collection pressures. This additional reform work will sit on top of business-as-usual compliance at a time when many practices cannot easily recruit new staff. CA ANZ has requested discussions with the ATO about how agents can balance reform implementation with ongoing lodgement, advisory and client service workloads.

The EET is a welcome attempt to offer an alternative to costly restructuring, but it is not yet a complete solution. Without clear answers on duty, fiduciary obligations, GST, CGT, residency and legislative determinations, both pathways may impose significant compliance burdens. Government must give advisers and taxpayers enough time, certainty and legislative coherence to implement these reforms without undermining business-as-usual tax compliance.