The Albanese government faces growing opposition from business groups over proposed tax reforms targeting trusts, which are expected to affect up to 400,000 small and family business owners across Australia. Following last week’s parliamentary approval of changes to capital gains tax (CGT) and negative gearing, the next legislative phase, focusing on a minimum 30 percent tax on trust distributions, has sparked significant concern about its potential impact on small business viability and the broader economy.

The Council of Small Business Organisations Australia (COSBOA) and the Australian Chamber of Commerce and Industry (ACCI) have both voiced worries that the reforms could impose additional financial pressures on small businesses already grappling with inflation, workforce shortages, and challenging trading conditions. COSBOA chief executive Skye Cappuccio emphasized that many small enterprises rely on trusts for legitimate commercial purposes such as succession planning and asset protection, rather than as tax minimisation tools. Cappuccio cited the example of a family-owned business expecting a substantial tax increase—from $45,000 to $60,000 annually—that could limit investment in productivity-enhancing equipment.

Andrew McKellar, ACCI’s chief executive, described the minimum tax on trust distributions as potentially having broader ramifications than the recent CGT reforms, possibly leading to higher prices for goods and services as businesses adjust to increased tax burdens.

Amid these concerns, Treasurer Jim Chalmers acknowledged on Sunday that some small businesses may be worse off under the new tax regime but noted that outcomes would depend on factors such as inflation and individual marginal tax rates. He also highlighted that Labor has raised the eligibility threshold for the 50 percent active asset CGT exemption from $2 million to $10 million in turnover, a move aimed at easing some pressures on small businesses.

The debate extends beyond economic considerations, with New South Wales Premier Chris Minns calling for tax policy to focus not just on revenue but on fostering economic growth. Minns urged his federal colleagues to consider the longer-term implications of tax measures, warning that future spending must be supported by a growing economy. He also indicated that Labor should engage directly with political challenges posed by Pauline Hanson’s One Nation party, which is making electoral inroads, particularly in outer-suburban and regional areas.

Meanwhile, polling data reveal continued erosion of support for the federal Coalition, which recently recorded its lowest primary vote on record at 17 percent, down from 18 percent three weeks earlier. One Nation holds a significant share of the primary vote, maintaining strong support among voters who prioritize emotional connection and recognition over clear policy platforms—a dynamic complicating efforts by both major parties to address economic and social issues.

Political leaders across the spectrum acknowledge the need to balance addressing small business concerns with broader economic reforms. The government plans to advance legislation for the trust tax reforms by year’s end, while opposition figures are pushing for immediate parliamentary action on contentious elements of the tax changes, including the so-called “widows’ tax.” The ongoing debate underscores the complexities of tax reform amid shifting political landscapes and economic uncertainty.