Matt Grudnoff
Senior Economist

Question time saw the issue of trusts raised, with the opposition trying to paint the government as about to crack down on trusts in order to raise more revenue.

First, lets hope this is the case. There has been a rapid increase in discretionary trusts. Outside of reducing tax, discretionary trusts have no real purpose.

They are complicated tax structures used by high income earners to avoid paying tax. But even if you don’t think the government should be raising more revenue, as the opposition does, there are still very good reasons why you would want to get rid of them.

The opposition could agree that we get rid of discretionary trusts and use the additional revenue to cut income taxes. At the moment it is the wealthy who take the biggest advantage of discretionary trusts. Most people can’t use them. Why set up a tax system where only a small group can avoid tax. It would be better, even if you didn’t want to raise more revenue, to have a simpler tax system with lower tax rates.

Both sides of politics talk about simpler taxation. Trusts are the very opposite of simple.

The opposition often call for taxes to be lower, simpler, and fairer. You could achieve all three if you scrapped discretionary trusts.