Treasurer Jim Chalmers is facing criticism over recent government policy missteps, particularly surrounding changes to trust law and a ban on credit card surcharges, which some say have had unintended negative impacts on small businesses. Critics argue that the government has failed to fully consider the implications of these reforms, resulting in financial strain for many enterprises.

The credit card surcharge ban, introduced to prevent businesses from charging customers extra fees for credit card payments, has come under fire for not delivering the intended relief to small businesses. While large retailers such as supermarkets benefit from negotiated, discounted merchant fees, smaller operators have continued to bear full transaction costs without government assistance. This discrepancy has forced many small businesses, already facing declining consumer confidence and tightening profit margins, to either absorb these costs or pass them on to consumers through higher prices. The Australian Taxation Office (ATO) highlighted the inconsistency of the government’s approach, noting that it was unwilling to absorb these fees itself. Chalmers acknowledged that he had personally authorised this policy, which critics say reflects a lack of understanding of its broader economic consequences.

This surcharge policy issue is part of a pattern of challenging policy reversals experienced by the Treasurer since the start of the year. Among other setbacks, the government reversed course on proposed capital gains tax changes affecting early-stage start-ups and small businesses, following concerns about the potential value erosion of emerging companies and strong public opposition. Additional retreats involved the scrapping of a so-called “widows' tax,” which would have ended negative gearing benefits for surviving spouses, and the withdrawal of minimum tax proposals on testamentary trusts, seen by opponents as an indirect “death tax.” The government also introduced a new trust model limiting beneficiary nominations to individuals existing by mid-2028, a move some commentators have dubbed a “baby tax” because it excludes future children from beneficiary status.

The trust law overhaul has been particularly contentious. The current laws, which are more than a century old, commonly underpin small businesses and self-employed individuals seeking asset protection. Critics argue that the government’s reforms misunderstand the multifaceted uses of trusts, which often include inter-trust distributions, especially in sectors like construction. Introducing minimum taxes on these distributions risks imposing tax liabilities greater than the applicable income, endangering business viability.

Moreover, the proposed changes could trigger further challenges if small businesses decide to convert their existing trusts into corporate structures. Such conversions would likely incur state stamp duties, for which no relief has been offered by state governments or the federal administration. This restructuring would also necessitate the reassessment of finance arrangements, as banks would need to renegotiate facilities under a changed taxation landscape characterized by rising inflation, elevated taxes, decreasing asset values, and squeezed profits. The resulting tightening of credit conditions and increased borrowing costs could exacerbate financial pressures on smaller enterprises.

While the government initially released the trust reform proposals as an exposure draft inviting feedback, critics urge a more cautious approach. They recommend the release of an updated draft reflecting consultations prior to parliamentary consideration to avoid further unintended economic consequences.

The Treasury’s handling of these policy areas has drawn rebuke from opposition figures, including Shadow Treasurer Tim Wilson, who called on Chalmers to abandon the proposed trust law reforms to prevent additional harm to small business. The government has yet to outline how it will address the mounting concerns associated with these legislative changes.