Written

For

The

Australian

-

Family

trusts

in

Jim

Chalmers’

sights

after

super

tax

backflip

Chalmers just pulled a Robin Hood — but the math doesn't add up, and family trusts are about to become the government's next target.

This week's super tax backflip is a win for common sense. Scrapping the tax on unrealised gains was the right call, and giving 1.3 million low income earners a break on contributions tax is genuinely good policy. But here's the problem: the revised super tax is now forecast to raise just $2bn over four years, down from the original $6.2bn. That's a $4bn hole the Treasurer needs to plug.

My money is on family trusts being next in the firing line. There are already more than a million trusts in Australia holding around $500bn in assets, and after this week, that number is only going one way. The ACTU is already agitating for a 25 per cent minimum tax rate on trust distributions, so Chalmers won't lack for cheerleaders if he moves.

Why the migration? Compare the numbers. Above $10m in super, you're looking at 40 per cent on income and 26.7 per cent on capital gains. Inside a family trust, you can spread income across low-tax beneficiaries — adult kids at uni can receive nearly $23,000 tax free — and use a bucket company at 25-30 per cent as a failsafe. For a wealthy family with multiple beneficiaries, the trust wins.

Two caveats before anyone rushes to restructure. First, the ATO is clamping down hard on "paper distributions" — if you allocate income to your kid, the money actually needs to land in their bank account. Second, moving assets out of super triggers CGT and stamp duty, and for assets held for decades, the numbers often don't work.

The government is banking on inertia. I think they're wrong. Expect a flood out of super, followed by an inevitable game of whack-a-mole as Canberra chases the money.