A new report reveals a significant increase in the use of trusts as people seek to reduce their tax burden amidst rising living costs.
The number of people utilizing trusts to minimize their tax obligations has risen by nearly 15 percent. As soaring housing and rental costs over the past three years strain household budgets, data released by the federal Treasury on Tuesday revealed that distributions from trusts – frequently employed by business owners, farmers, and investors – have reached an unprecedented high.
The annual tax expenditure report, initiated by former Treasurer Peter Costello, aims to monitor the budgetary impact of concessions such as reduced tax rates on superannuation or the 25 percent company tax rate for small businesses. The largest concession remains superannuation, projected to cost the budget $55.5 billion in lost revenue this financial year, up from $54.2 billion in 2023-24. The next most significant concession is the exemption of the family home from capital gains tax, valued at $51.5 billion this year, representing an 8 percent increase from the $47.4 billion recorded last financial year. However, the net income individuals reported receiving from trusts surged by more than 12 percent, or $7 billion, to a record $67 billion. While the number of individuals reporting income from trusts also increased, the rise was considerably smaller, at 6 percent to 1.8 million. The surge in trust utilization was attributed primarily to high-income earners, with nearly 420,000 individuals in the top 10 percent of taxable income accounting for 63 percent of all net income channeled through trusts, up from 370,000 the previous year who accounted for 61 percent of trust income. The Treasury indicated that this substantial proportion of high-income earners claiming income through trusts stemmed from “a small number of individuals receiving very large amounts of income from trusts”. Conversely, the percentage of individuals with incomes ranging from $0 to $45,000 reporting payments through trusts declined to 31 percent from 34 percent
TRUSTS TAX INCOME ECONOMY REPORT
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