I rise to speak on the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and the accompanying Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026. Our tax system needs to be fairer, simpler and more sustainable for all Australians. This must be at the forefront of our minds when considering these bills. I recognise the government's objective with this legislation of reducing inappropriate income splitting through discretionary trusts, particularly where these arrangements allow wealthy individuals to minimise their tax obligations in ways that are not available to ordinary wage earners. There is a legitimate fairness issue here, and I support efforts to address it. But we must ensure that, in seeking to close tax loopholes, we do not inadvertently penalise small businesses, family enterprises and start-ups that are the backbone of our economy. Fairness is not just about the rate of tax that people pay; it's also about ensuring that the rules are proportionate, practical and do not impose unreasonable burdens on those who are working hard and doing the right thing.

These two bills work together to introduce a minimum 30 per cent tax on the net income of discretionary trusts from 1 July 2028. The Treasury Laws Amendment (Tax Reform No. 3) Bill establishes the framework for the new tax, including exemptions, transitional arrangements and mechanisms allowing trusts to restructure or elect alternative arrangements. The accompanying Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill establishes the minimum 30 per cent tax rate itself. The Treasury laws amendment bill also includes further provisions relating to the government's capital gains tax and negative gearing reforms.

I want to make an important distinction right at the outset. I've supported reform of capital gains tax concessions and negative gearing where they relate to residential investment property because we urgently need to improve housing affordability and intergenerational equity. This is one of the most pressing and common issues that people all across Mackellar raise with me. For too long, our tax settings have encouraged investment in existing housing in ways that have contributed to younger Australians being priced out of homeownership, but changing the tax treatment of residential property investment is a very different matter from fundamentally changing how discretionary trusts are taxed. Discretionary trusts are used across the economy for a wide range of legitimate purposes, including by family businesses, entrepreneurs and start-ups. These reforms are a substantial change to the tax treatment of business and family structures.

I acknowledge that the government has listened to some concerns raised during consultation and has made important improvements to the original proposals. These changes are welcome. The legislation now provides a number of pathways for discretionary trusts to avoid the new minimum tax. One option is to restructure into a company or another eligible structure, supported by a three-year Commonwealth income tax rollover relief period commencing on 1 July 2027. Another is the excluded election trust arrangement, which allows eligible trusts to avoid the minimum tax by electing to distribute income to nominated beneficiaries in fixed proportions. Exemptions have also been expanded for particular types of trusts and income, including genuine testamentary trusts, charitable trusts, special disability trusts, primary production income and certain income relating to vulnerable minors. These are significant improvements, and I acknowledge the work that has gone into responding to stakeholder feedback.

But, while this bill is better than the original proposal, the central question remains: will these changes improve fairness without placing an unreasonable burden on Australian families and small businesses? Small-business owners are already operating in an extraordinarily challenging environment. They are dealing with higher operating costs, insurance premiums, rents, energy prices, workforce pressures and an increasingly complex regulatory environment. They are often doing so without large accounting departments, legal teams or substantial financial reserves. As the Council of Small Business Organisations Australia has stressed, the mechanism chosen to address tax avoidance must be proportionate to the problem and respectful of the legitimate structures through which hundreds of thousands of Australian small businesses operate.

For those businesses that are affected, the financial and administrative consequences could be significant. CPA Australia, a professional accounting body, has estimated that the professional advice required for trust owners to determine how to respond to the proposals could cost the country between $2 billion and $2.8 billion. The government's own estimates identify substantial one-off implementation costs and additional ongoing compliance costs. These are not insignificant figures. Every dollar a small business spends navigating complicated tax arrangements is a dollar that cannot be invested in new equipment, innovation, hiring staff or growing the business.

I've heard directly from constituents in Mackellar who are deeply concerned about these changes. One constituent is a co-founder of a technology startup established in 2024. They left full-time employment to pursue their business and invested considerable money in professional advice to establish a discretionary family trust to hold their startup shares. They did so for legitimate reasons, including asset protection, managing the uncertainty of income during the early stages of building a business and providing flexibility for their family's future. They were taking a significant personal and financial risk to create something new. This is precisely the kind of entrepreneurial activity we should be encouraging here in Australia. We need more people willing to start businesses, commercialise ideas, develop new technologies and create the jobs of the future. But these reforms raise uncertainty for founders who have organised their affairs in good faith under longstanding tax arrangements.

Discretionary trusts are not exclusively vehicles for the wealthy. They are also widely used by everyday Australians, family businesses and startup founders to provide asset protection, manage changing family circumstances and support business succession. Another constituent from Mackellar has shared the experience of their single-income family, which operates two discretionary trusts. The family wanted to protect assets for their two daughters and future generations, particularly in the event of relationship breakdowns, and, with modest superannuation savings and no expectation of qualifying for the age pension, they were seeking to provide for their own retirement and reduce their future reliance on government support. Importantly, this constituent points to the higher income tax burden they face as a single-income household compared with a dual-income household earning the same combined income. For this family, the proposed changes feel like the goalposts are being moved after years of prudent financial planning.

Their concerns go well beyond the tax rate itself. Restructuring out of a discretionary trust could mean losing the asset protection arrangements they deliberately established for their children. It could also require the consent of their bank to transfer existing finance to a new legal entity, consent that lenders are under no obligation to provide. This constituent's experience raises an important question: how do we ensure that reforms aimed at preventing tax avoidance do not penalise families who have worked hard, lived within their means and made responsible financial decisions to provide for their children and their retirement? These are precisely the kinds of unintended consequences that we cannot ignore.

One of my particular concerns is the practical operation of the excluded election trust regime. On paper, this provides a way for trusts to avoid the 30 per cent minimum tax without having to restructure, but, for family businesses, fixing distribution proportions can create real difficulties. Families are not static. Children grow up and become involved in a business. Grandchildren are born. Relationships change. People experience illness, disability, divorce or bereavement. An arrangement that makes sense for a family in 2028 may no longer be appropriate in 2035. Professional bodies have raised concerns that revoking an election or changing beneficiary proportions outside the permitted rules could expose the trust's income to taxation at the highest marginal rate. That creates a potentially severe consequence for what may simply be a genuine change in family circumstances.

A second concern is restructuring. The Commonwealth has provided capital gains tax rollover relief, but the Commonwealth does not control state and territory stamp duties. A business transferring assets into a new structure may still face substantial transfer duty liabilities, thus making restructuring not commercially viable. Businesses and families are being asked to make complex, potentially irreversible decisions without having the full set of rules in front of them.

We also need greater transparency and independent assessment about the cumulative impact of government policy on small businesses. Government policy decisions that introduce tax, regulatory and reporting measures like the proposed 30 per cent minimum tax on these trusts are too often assessed individually without adequately considering their cumulative impact on small businesses. Added to this, the existing impact analysis framework does not require dedicated, independent small-business impact statements for all major policy decisions across portfolios. We must mandate publicly available small-business impact statements for all major policy decisions materially affecting small businesses, prepared or independently assessed by a strengthened and adequately resourced Office of Impact Analysis. Ministers must be required to publicly explain how small-business impacts have been addressed and, importantly, what measures have been taken to minimise regulatory and compliance burdens on small business. They are simply drowning under red tape already. I will move an amendment, circulated in my name, to this effect.

I want to finish by returning to the principle of fairness. It is fair to expect wealthy Australians to pay their fair share of tax, but it is also fair to expect that people who have built businesses, invested their hardworking savings and taken commercial risks should not be exposed to disproportionate costs and uncertainty. We need a tax system that rewards enterprise, encourages investment and supports innovation. We need more startups, more successful family businesses and more Australian owned companies growing and employing Australians, and we need to make sure our pursuit of tax integrity does not undermine those objectives. The real-world consequences of this legislation for hardworking families and small businesses present a real risk. That's why I won't be supporting the bills today in their current form, but I encourage the House to support the amendment circulated in my name. I move:

That the following words be added after paragraph (2) (c):

(a) small and family businesses are the backbone of the Australian economy, supporting employment, investment, innovation and local communities;

(b) small businesses face growing cost pressures from the cumulative impact of taxation, reporting and regulation across government portfolios;

(c) government policy decisions, like the proposed 30 per cent minimum tax on discretionary trusts, are too often assessed individually, without adequately considering their cumulative impact on small businesses; and

(d) the existing Impact Analysis Framework does not require dedicated, independent Small Business Impact Statements for all major policy decisions across portfolios; and

(4) calls on the Government to:

(a) mandate publicly available Small Business Impact Statements for all major policy decisions materially affecting small businesses, prepared or independently assessed by a strengthened and adequately resourced Office of Impact Analysis; and

(b) require ministers to publicly explain how small business impacts have been addressed and what measures have been taken to minimise regulatory and compliance burdens".